China stocks edge down despite relaxation of QFII rules; HK up

SHANGHAI, Feb 5 (Reuters) - China stocks dipped on Friday morning with participants taking the view that government moves to raise investment ceilings for overseas investors won’t lead to an immediate surge in foreign buying of Chinese equities.

Hong Kong shares rose, aided by overnight gains in U.S. and European markets.

But trading in both markets is thin, as many traders have already left for the Lunar New Year holiday. Mainland markets will be closed next week, while the Hong Kong market will be closed Monday to Wednesday.

China’s blue-chip CSI300 index fell 0.3 percent, to 2,975.66 points at the end of the morning session, while the Shanghai Composite Index lost 0.1 percent, to 2,777.88 points.

China unveiled new rules on Thursday that would allow investors under the Qualified Foreign Institutional Investor scheme (QFII) scheme to buy more stocks and bonds, and make it easier for them to move money out of the country.

Indeed, there are signs that some foreign investors are pulling money out of China’s stock market, on concerns about economic growth and the value of the Chinese currency.

Most sectors fell, but resources shares were firm, bolstered by top steelmakers such as Wuhan Steel and Baoshan Steel on expectations of industry consolidation.

China will cut crude steel capacity by 100 million-150 million tonnes within the next five years in a bid to tackle a glut that has dragged prices down to multi-year lows and saddled firms with huge debts.

“This will surely benefit the leading companies in the industry as their market shares are bound to rise,” said Tian Weidong, analyst at Kaiyuan Securities.

“My estimate is in two years the overcapacity will be gone.”

The Hong Kong market benefited from strong gains in resources and energy plays on the back of a recent recovery in commodity and oil prices.

Reporting by the Shanghai Newsroom and Pete Sweeney; Editing
by Eric Meijer